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Prying open the 5th door

Opening the "fifth door" is no where near as simple as saying "open sesame." Moving past the 4-door rule at many retail banks is a major impediment to growing a real estate portfolio. But there are real tricks to getting that fifth door open. CREW reports.

Video transcript below:

Caitlin Nobes: The 4 door policy of most banks is jamming the growth of small investors. Should investors move to the commercial side to open the 5th door or should they [sit back]. We explore the options on this week’s episode of Investor Insight on Crew TV.

The 4 door policy may appear to be a stumbling block for investors, especially those starting off on their real estate journey. That challenge, is it going away anytime soon.

Shawn Maher, G.S. Maher Solutions Inc.Shawn Maher: Well the 4 door policy is I think is put in place to number one cool off the economy a little bit to the real estate market. But young investors getting into the market, I know if there was a 4 door policy when I started, it probably wouldn’t have bothered me that much, because I used multiple lenders.

So I don’t just deal with one bank. And when you get to the level when you start, you know your portfolio starts to grow, the bank really probably just wants you to move to next level in the commercial division, which is a little bit more expensive, but it does have a little bit more, less liability for your company with having to and to the way you structure your company as you are growing.

So I don’t think it will have as big a negative impact as people think it’s going to have. But do I think it’s fair? You know, right now everything is overheated so it’s probably a bit thing that the banks tightening up a little bit. It’s probably not a great thing for investors that are just starting out [resourcing].

COMMERCIALCaitlin Nobes: Going to the commercial side because there are associated costs. So is it an option for everyone?

Don Foley, The Property DonDan Foley: Well in terms of financing for anything, whether it’s commercial financing, residential financing any rules have really got significantly tighter over the past year or two. In terms of commercial lending, there is a lot more regulations for the investor, larger down payments, sometimes higher interest rates. So my recommendation to my clients, unless they are significantly, significantly large investors with several properties, multi unit residences, is to go with the residential, much easier to qualify for better rates and more palatable down payments.